What are mid cap funds and why should you consider them?

You may have heard about mid cap opportunities fund in India and similar products. What you should know is that mid-cap stocks are from companies which come in the ambit of midsized market capitalization as clearly stated by SEBI (Securities and Exchange Board of India). These are companies which have ranks between 101 and 250 of the list of classification by SEBI with market capitalization falling between Rs. 500-10,000 crore on an average.

This shows the sheer mid cap opportunity for investors since these are equity mutual funds investing in stocks of companies in the mid-cap segment. The company size plays a vital role when it comes to taking investment decisions. Mid-cap companies are those in the middle of growth cycles and this means that the true value is still to be fully realized although their services/products have already been tested. These stocks offer ample potential for earning higher returns in the future. Simultaneously, there are higher risk levels owing to market uncertainty and overall uncertainty regarding their performance in the future.

Mid cap opportunities fund in India- Things you should keep in mind

When it comes to investing in a mid cap opportunities fund in India, you should always keep a few things in mind.

• You should invest in mid cap mutual funds if you have higher appetite for risks and 3-5 years as your minimum timeframe for investments.
• Mid cap funds will be investing in equity and equity linked instruments of mid-cap entities in the market. The market capitalization of the 250^th company in the SEBI list is approximately Rs. 9,500 crore while the 101^st company on the list has a market cap of Rs. 30,000 crore.
• Returns from mid cap funds are usually superior to large cap funds although the risk and volatility levels are higher. They are more stable in comparison to small cap funds but returns are lower in comparison as well.
• These funds are an ideal combination of good returns and ample risks as well. If you choose schemes with wide selections of stocks and ample diversification throughout business sectors (for spreading/lowering risks) and professional fund managers, then you can get great returns.
• Investing for at least 8-10 years is ideal if you wish to grow your money through compounding. Choose schemes which emphasize more on market research and good investment opportunities.
• Every scheme comes with its own rating and this is what you should keep in mind while considering
• The longer you hold onto your investment portfolio, the better your chances of garnering handsome returns. Several mid-cap companies can be stellar large-cap companies in the future.
• Check the expense ratios of schemes that you invest in. All mutual fund firms will be charging fund management and administrative costs which should be a maximum of 2.50% as per SEBI regulations. A lower expense ratio will equate to better returns on your mutual fund investments.

Keeping the above pointers in mind will help you take an informed decision on investing in mid cap funds.